When iodine and starch interact, iodine molecules become arranged within the starch molecules in a linear fashion. The visible end result of this arrangement is the appearance of a blue-black coloration.
Natural starches, such as potatoes, are combinations of two fractions: amylose and amylopectin. Amylose is the particular fraction whose reaction with iodine produces a telltale indigo hue. Unlike branch-shaped amylopectin molecules, the structure of amylose contains acetal linkages conjoining long polymer chains of glucose units, giving its molecules more of a linear coil shape.
The Amylose compels linear triiodide ion complexes into the central groove of its coil-shaped molecules. The ensuing transfer of charge between the iodine and the starch alters the manner in which electrons are confined and, in turn, their energy-level spacing. The new energy-level spacing is sufficient to absorb visible light selectively, producing a bluish tint.
There must be iodine and iodide ions present in order for this reaction to take place. A combination of the two yields an anion, which has more negatively charged electrons than positively charged protons. The complex of iodine and iodide ions is also water soluble, and this solubility is necessary for the formation of the linear triiodide ion complexes that bind within amylose molecules.
Iodine and iodide ion complexes also bind with amylopectin molecules, but the branched shape of amylopectin molecules limits the degree of binding. This limited binding typically registers to the naked eye as a purple or rust-colored solution.